As California burns, a showdown on who pays for wildfire damage

Watch 14 days of wildfire smoke cover California

From July 25 through August 7 California has been covered with smoke from wildfires visible from space in these NASA images.
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From July 25 through August 7 California has been covered with smoke from wildfires visible from space in these NASA images.

As huge swaths of California burn, both sides are digging in for the huge fight over who pays for wildfire damage – a high-stakes debate that will intensify when the Legislature reconvenes on Monday.

Investor-owned utilities, led by PG&E, want state liability laws changed to reduce their legal responsibility so they only pay damages when they are clearly at fault. PG&E also wants the state to help finance its payments for the horrific wine country fires last October.

Insurance companies and the California State Association of Counties oppose any change to liability laws, saying it would unfairly shift costs to homeowners and local governments. The Up From the Ashes coalition of wildfire victims argues any change would actually be unconstitutional.

Despite these all-or-nothing positions, everyone agrees California is in a “new normal” of drought, climate change and year-round wildfires so powerful that they create their own weather and scare even experienced firefighters.

To his credit, Gov. Jerry Brown has given legislators a thoughtful framework to work from, though critics say it gives too much to utilities. Building from the Brown’s plan, there ought to be a potential compromise that rewards wildfire prevention and that balances the interests of homeowners, ratepayers and taxpayers, as well as insurers, utilities and state and local governments.

The key dispute centers on what is called inverse condemnation. Under that longstanding legal principle, utilities have the same powers of eminent domain as governments to put up power lines and other infrastructure on private property. In return, utilities are responsible for paying damages if their equipment starts a fire, even if it they are not negligent.

Brown’s plan does not change any liability for last year’s fires, including the wine country fires that killed 44 and caused property damage of an estimated $10 billion. PG&E – which is being sued by victims and has been blamed by Cal Fire for some of the blazes – has set aside $2.5 billion, but might have to pay more.

The governor’s proposal would cover fires after Jan. 1, including the County Fire that scorched more than 90,000 acres in Yolo and Napa counties before being contained in mid-July. It would also apply to the still-burning Carr Fire in Shasta County (already the sixth most destructive in California history after killing at least six people and burning through more than 1,000 homes and 115,000 acres in and near Redding), the Ferguson Fire near Yosemite National Park and the fires in El Dorado, Lake and Mendocino counties.

Under the governor’s plan, before deciding whether a utility should pay damages – and how much – courts would determine whether the utility acted “reasonably,” which includes whether it followed state rules and its own prevention plans. Judges and juries would have to balance the public benefit of electrical infrastructure with the damage to private property.

It’s up to a special joint legislative committee, which is scheduled to meet Tuesday and Thursday, to try to draft a reasonable bill that can actually pass. For one thing, the panel must address fire victims’ concerns that Brown’s proposal gives courts too much room for interpretation on whether a utility acted “reasonably,” and too much leeway to award compensation that doesn’t fully cover damages.

Legislators also need to look at whether publicly owned utilities, including SMUD, should be given more legal protection. They argue that since they don’t have shareholders, they have to pass on all fire damage costs to their customers.

PG&E – which has already spent $1.1 million to lobby state lawmakers and officials on this issue – calls Brown’s plan a “constructive first step,” but says there needs to be a “more comprehensive” solution that includes help for the 2017 wildfires. It is pushing Assembly Bill 33, which would authorize low-cost state bonds – to be repaid by customers – to help it finance the payments for damages when it wasn’t at fault.

In TV ads by an advocacy group it helped create and in media materials, PG&E is promoting the message that the state’s laws have to keep up with climate change and that California needs financially healthy utilities to keep a reliable power grid and to meet clean energy goals.

We do need utilities to stay in business. Still, they shouldn’t expect a big bailout from taxpayers. Better to have no change than to unfairly shift huge costs to homeowners and ratepayers.

While attention is focused on the potential liability changes, much of Brown’s plan is a detailed list of increased requirements on utilities, designed to prevent wildfires, or at least limit their damage.

▪ It would require utilities to enhance construction, maintenance and operation of their electrical lines and equipment to reduce wildfire risk, and require more inspections.

▪ It would mandate more detailed wildfire prevention plans and an independent evaluation before the Public Utilities Commission decides whether to approve them.

▪ And it would double the maximum penalty for safety violations to $100,000 and prohibit fines from being recovered through rate hikes.

All these proposals make sense. As the governor warns, the wildfire threat is only going to get worse. “We’re in for a really rough ride,” Brown said at a press conference Wednesday with Cal Fire and state emergency officials. “It’s going to get expensive, it’s going to get dangerous, and we have to apply all our creativity to make the best of what is going to be an increasingly bad situation.”

Utilities must be part of that effort. The fight over legal liability should not distract from the need to stop fires from happening in the first place. That, after all, would be the best outcome for all sides.